Electric Guitar PLC (AIM:ELEG) this morning made its AIM debut following a successful acquisition and fundraiser that places the former SPAC at the forefront of marketing technology.
It has acquired 3radical, which has developed a sophisticated customer engagement and first-party, or ‘earned’ data platform, in an all-paper deal worth £1.28 million, and it has raised a further £2.2 million including £1.32 million of new cash that will be used to grow the business.
The IPO is a rarity in the current market for small-caps where risk capital is at a premium.
Serial entrepreneur John Regan, Electric Guitar’s CEO, isn’t daunted by the challenge posed both by the capital markets or trickle-down impact on sentiment of global geopolitical uncertainty, rising costs and higher interest rates.
Aspiring unicorn
In fact, in his eyes, this may be the ideal time to bring to life his fifth business.
If the market turns, and there is a growing weight of opinion that suggests it will in the second half, then the valuation should rise very quickly from current levels.
“We’d love to create a unicorn, and we’ll give it a good try,” says Regan.
The plan is to buy and build businesses that can either be vertically integrated or are in adjacent business areas and geographies to 3radical.
Regan said he is seeing plenty of deal opportunities – enough to suggest it remains a buyer’s market.
Electric Guitar has kicked off its acquisition spree with a foray into first-party or ‘people first’ data, which is where users consent to share information that marketers then use.
Regulatory shake-up
This area will become very important as internet titans such as Apple, Meta, Microsoft and Google are forced to stop pilfering comprehensive user (and valuable) insights en-masse and free of charge.
The regulatory noose is tightening for Silicon Valley both here in the UK and Europe, and increasingly on their own doorstep.
And don’t be fooled by Google’s decision to delay third-party cookie depreciation. The problem is real for ALL the world’s tech companies.
Electric Guitar’s 3radical business uses a deceptively simple method of gathering consented data using a platform called Voco that also helps promote engagement and loyalty by offering games, electronic scratch cards and discount codes to website users.
Its customers include a global payments processor, lens maker Essilor, Singapore’s MEDIACORP, and VisitScotland.
Tailored products and services
The benefit of using first-party data of the type gathered by 3radical is that it allows the advertiser to create tailored products and services customers want, or accurately target the correct group, rather than guessing.
Regan uses the example of Tesla, which until recently didn’t advertise. Instead, it built a comprehensive picture of a prospective customer by interacting digitally with prospects to understand what they required or wanted from an EV.
“Tesla has a very compelling app that understands exactly what the end user wants and helps the customer pick the specifications of the car they require. They’ll even deliver it to your drive,” explains Regan.
“Using your voluntarily-provided first-party data, it understands your requirements. And this means you are more likely to buy.”
The potential market opportunity for businesses such as Electric Guitar’s 3radical is significant.
Significant market opportunity
It is estimated that last year $602 billion was spent on digital advertising, a figure that is predicted to rise to $871 billion in 2027, representing 74% of total ad expenditure.
In parallel, the identity, data, technology, and services sector, particularly in the US, UK, and EU—areas critical to the company—was expected to grow at a compound annual growth rate (CAGR) of 8.3% from 2022 to 2026. By 2023, this segment was valued at $51 billion.
So, even a small slither of that cake would be meaningful. The plan is to use the IPO funding to grow a top sales operation.
This business development team will also be used as a central resource for businesses that are acquired over the coming months and years.
Regan said the company would also invest in analysing and dissecting data using artificial intelligence and machine learning from the half-billion ‘engagement events’ the company has stored over the last eight years.
Good team, 'really solid' dataset
In doing so, it aims to create AI-powered products and services.
“We know that we have a really solid dataset, and without good data, AI is useless,” says the Electric Guitar CEO.
Regan, a veteran of the data-tech industry, has assembled an impressive board and management to run and grow Electric Guitar and has M&A, legal and data industry experience.
“We have an effective, good, and strong team and a strong investment proposition we're able to explain to investors, and a huge potential market opportunity,” says Regan.
“This is a business that’s going to grow strongly as the market is increasingly disrupted by structural change. It’s a perfect storm for us right now.”